Mark Faber was recently interviewed about the prospects or the global economy over the next 10 years.
Faber noted that perhaps the most inexpensive asset class in the world right now is US real estate. He quipped that some US real estate in places like Florida is actually cheaper than in countries like Thailand.
Some shrewd speculators are now buying US real estate as a way to profit from potential funding crisis in the United States. By taking out 30 year low-interest mortgages to purchase key commercial property the speculators find that they can profit from a bond market crisis or a dollar crisis in the US. It is a similar playbook to what speculators have followed prior to any inflationary or hyperinflationary period. Speculators basically wait for their debts to be washed away by money printing.
Faber also noted that some European equities are attractively priced. Even though in the short term equities might fall by 20 or 30% or even more as the euro may not survive. However, when one takes a longer time horizon of 10 years or more bonds and cash become a risky investment. Real assets such as choice real estate, gold and high-quality equities such as Johnson & Johnson seem to make more sense then investing for an Uber deflationary environment where treasury yields hover around 1.5%.
Faber and other newsletter writers such as the Aden sisters expect that gold could continue to correct throughout the summer. Even feel it was a lot of mentioned that gold might slip below $1500 an ounce as the deflationary worries in the global economy continue to accelerate. However, both view this as an opportunity to accumulate gold prior to a large run-up that is expected in 2013 and beyond.
“I am bearish basically about US treasuries and government bonds in general. I think that equities will outperform bonds. As I said I prefer gold over industrial commodities and I want to own some real estate not because I necessarily think it will go up. I prefer some assets because I am worried about the financial system in general. It will one day collapse massively and we will have a complete chaos in the financial system. I think that the financial sector is doomed. So I want to own some assets. So, to answer your question, I just want to be diversified around the world.”